Explosive Bubble Modelling by Noncausal Process

Christian Gourieroux and Jean-Michel Zakoian

No 2013-04, Working Papers from Center for Research in Economics and Statistics

Abstract: The linear mixed causal and noncausal autoregressive processes provide often a better fit to economic and financial time series than the standard causal linear autoregressive processes. By considering the example of the noncausal Cauchy autoregressive process, we show that it might be explained by the special associated nonlinear causal dynamics. Indeed, this causal dynamics can include unit root, bubble phenomena, or asymmetric cycles often observed on financial markets. The noncausal Cauchy autoregressive process provides a new modelling for explosive multiple bubbles and their transmission in a multivariate dynamic framework. We also explain why standard unit root tests will fail in detecting such explosive bubbles

Keywords: Causal Innovation; Explosive Bubble; Noncausal Process; Unit Root; Bubble Cointegration (search for similar items in EconPapers)
Pages: 48
Date: 2013-02
New Economics Papers: this item is included in nep-cwa, nep-ecm and nep-ets
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2013-04.pdf Crest working paper version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2013-04

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.